Former in-house lawyers weigh in on legal finance: Part I

Of the 55 lawyers on Burford’s global team as of publication, 18 are former in-house lawyers, including Burford’s CEO, Christopher Bogart, who co-founded Burford in 2009 inspired in no small part by his experience as the former General Counsel of Time Warner Inc.

In June of 2019, Burford Senior Managing Director and former in-house lawyer Aviva Will gathered members of the team who recently joined Burford from in-house legal teams for a roundtable discussion of lessons learned on both sides of the in-house/legal finance divide.

Craig Batchelor, Former Vice President, Barclays

Christopher Catalano, Former Assistant General Counsel, JPMorgan Chase

Moderator: Aviva Will, Former Assistant General Counsel, Time Warner

All of you joined Burford directly from in-house legal teams, three within the last year. Although it’s my experience that many in-house lawyers are still just learning about legal finance as a category, you clearly saw an opportunity here at Burford. Tell us what appealed to you about making legal finance part of your career, and why you think it is an attractive transition for in-house lawyers.

Christopher Catalano: Legal finance was a natural transition from my in-house role. In-house, my docket was entirely defense side—I saw legal claims against my client as a potential liability to be managed and minimized. As primarily a claimant-side financier, Burford sees litigation claims as investable assets that if successful will generate value disproportionate to the legal spend. So the two roles are really mirror images of one another.

Craig Batchelor: Legal finance appealed to me because I could apply the skills I had developed as an in-house lawyer to this innovative and growing industry. As an in-house lawyer, you must quickly assess the strengths and weaknesses of new claims, consider different damages scenarios and evaluate potential outcomes to advise your internal clients. These are essentially the same skills that you need when evaluating a potential investment as a legal finance underwriter. What makes legal finance even more attractive is that you go from being a “cost center” to a “profit center” and get to work with some of the smartest and most creative lawyers around.

As an in-house lawyer, did you think about legal finance? How?

Christopher Catalano: Legal finance was a big part of my role at JPMorgan. My job was to spend money prudently on outside counsel and potential judgments and settlements. I was responsible for approving legal budgets, tracking spend against budget, setting litigation reserves, and ensuring that we were litigating the cases in a way and on a burn rate that was commensurate with the legal and business risks. The fundamental view that a legal claim is an asset (or liability) depending on which side the “v” you are on informs what I do every day at Burford.

What were the trends and pressures you faced in-house? Without addressing whether or not you used legal finance to relieve those pressures, could it have been useful to you?

Craig Batchelor: The overriding trend year after year was a pressure to reduce legal costs. For many in-house legal departments, costs soared in the years following the global financial crisis due to increased litigation and investigations, but many of those long-running matters are winding down, and companies are scrutinizing legal costs much more now than five or ten years ago. In hindsight, legal finance definitely would have been useful to me, particularly in funding affirmative claims that would have offset defensive legal costs and turned the in-house legal department into a profit center.

Christopher Catalano: It’s what you’d expect—better service at lower cost. In-house legal departments are not just cost centers in terms of in-house and outside spend, but, on the defense side, really should be thought of as cost-containment centers, because the decisions they make can help avoid painful judgments and settlements.

With a possible recession looming, how should GCs prepare for a possible downturn while still taking advantage of a growth economy? Has the global financial crisis of 2007-2008 better prepared in-house counsel to deal with the legal challenges that are part and parcel of economic uncertainty?

Craig Batchelor: Ironically, I do not think the global financial crisis has prepared in-house counsel in the financial services industry to deal with a possible downturn. The global financial crisis spurned a wave of litigation that caused in-house litigation departments and their corresponding legal spend to grow dramatically. Those legal departments are now under tremendous pressure to cut costs, and I believe those pressures will only get worse during a downturn.

Christopher Catalano: The global financial crisis caused a great leap forward in corporate clients recognizing the tremendous financial leverage they have over the law firms that work for them. What had been a cozy, patronage-type arrangement between certain big law firms and certain big clients became a much more of an arm’s-length business relationship. Expense took center stage. Clients put engagements out to bid rather than going back to the same firm. They took a closer look at whether they should be paying for the work of summer or junior associates. They pushed firms to outsource document review especially as the volume of documents exploded with the use of email and other electronic media. And “alternative fee arrangements” became anything but alternative. All of these changes have well prepared in-house lawyers prepare for any economic uncertainty that may lie ahead.

Read more of "Former in-house lawyers weigh in on legal finance": 

Part I • Part II

To read the article in full, download the Summer 2019 Burford Quarterly.